Camille Van Vyve
03 Jan 2025
2024: A year heading in one direction - the right one!
The year 2024 was undoubtedly a stellar year for the stock market. With global equities growing by +24,2%, investors enjoyed a highly favorable environment, despite some geopolitical and macroeconomic turbulence. Here's a look back at the key events that shaped this remarkable performance.
Start of the year: central banks remain the focus
Markets started the year cautiously amid still-restrictive monetary policies. However, early signs of slowing inflation in the spring brought a wave of optimism. Equity markets began to reflect hopes of an interest rate peak, setting the stage for a record-breaking year.
Technological revolution propels markets
The technology sector was at the heart of 2024's market euphoria. Announcements from major companies about significant innovations in artificial intelligence sparked massive enthusiasm. The Nasdaq and S&P 500 posted spectacular gains, driven by companies like Nvidia and Microsoft that thrived in this technological revolution.
The “Yen carry trade” causes a technical drop during the summer
The unexpected rate hike by the Bank of Japan (BoJ) triggered a technical drop in global markets because it disrupted massive financial positions tied to the "Yen carry trade." For years, investors had borrowed yen at low costs to fund high-yield investments. A rate increase made these loans more expensive, forcing many players to unwind their positions abruptly. This led to sharp movements in currencies, particularly a sudden strengthening of the yen, and a correction in stock and bond markets, which were caught off guard by this unexpected monetary tightening.
Ongoing conflicts in Ukraine and the Middle East
Conflicts in Ukraine and the Middle East continued to weigh on the global geopolitical climate in 2024. While the war in Ukraine dragged on without a clear resolution, tensions in the Middle East—particularly around oil production—added uncertainty to commodity markets. These events contributed to oil price fluctuations and cautious moves by investors in emerging markets. However, the impact on global equities remained limited, as these regions carry relatively low weight in the global market.
China faces headwinds
China, long a driver of global growth, saw its economic prospects dim in 2024. Structural slowdowns, unfavorable demographics, and persistently weak domestic demand reignited fears of prolonged stagnation. Fortunately, massive stimulus plans helped rejuvenate the Chinese stock market, which ended the year on a high note. Yet, as with the Middle East, and despite being the world's second-largest economy, China's relatively modest weighting in major global indices limited the impact of Beijing's stock market fluctuations.
US election boosts markets
The US presidential election was a pivotal moment of the year. The victory of a candidate perceived as pro-business and pro-financial markets triggered a wave of optimism. Promises of economic stability and business-friendly fiscal policies bolstered investor confidence, giving an additional boost to US equities.
Strengthening dollar widens the gap with European markets
The combination of a strong tech boom led by the United States and Trump's victory, which strengthened the dollar, widened the gap between US and European markets. While the Euro Stoxx 600 posted a +9,5% gain for the year, the Nasdaq Composite soared by +39%! But a strong dollar benefited euro-based investors, giving them "more bang for their buck." Thus, the yield gap between the Nasdaq Composite in dollar terms and euro terms reached 9% for the year.
A record year for global equities
Despite geopolitical and economic uncertainties, 2024 ended with an exceptional performance for equity markets, thanks to solid fundamentals and renewed risk appetite. Bond markets also showed signs of stabilization, supported by expectations of monetary easing in 2025. In an ever-evolving environment, with disruptions from the new Trump administration and reshuffling in the Middle East following the fall of Bashar al-Assad's regime in Syria, this year underscores the importance of staying invested and diversified, no matter the circumstances.